Judge Mike Camacho, Case Number: 22SMCV01642, Date: 2023-07-21 Tentative Ruling

Judge: Mike Camacho, Case: 22SMCV01642, Date: 2023-07-21 Tentative Ruling

Case Number: 22SMCV01642 Hearing Date: July 21, 2023 Dept: P

Tentative Ruling

Smith et al. v. GNG Development LLC, Case No. 22SMCV01642

Hearing date July 21, 2023

Plaintiffs’ Motion for Summary Adjudication

The Smith plaintiffs hired defendants Farhad Ghaemi and his company GNG Development to perform remodeling. The contract warrants that GNG possessed a contractor’s license. Plaintiffs alleges GNG was unlicensed and defedants breached the contract by failing to obtain work permits.

Plaintiffs move for summary adjudication of the Bus. and Profs. Code §7031 claim and adjudication of issues of duty connected to the breach of contract claim. Plaintiffs filed and withdrew a summary adjudication request as to treble damages.

A plaintiff fulfills his or her initial burden on summary adjudication or judgment by proving each element of the relevant cause of action. Code of Civ. Proc. §437c(p)(1). The burden then shifts to defendant to show a genuine issue of fact as to one or more elements or an affirmative defense. Celotex Corp. v. Catrett (1986) 477 U.S 317, 323.

Objections

GNG Objections:
Objections 1-4 OVERRULED, Objection 5 SUSTAINED (document speaks for itself) Objections 6-12 OVERRULED, Objection 13 SUSTAINED (hearsay), Objection 14 SUSTAINED (lack of personal knowledge), Objections 15-16 SUSTAINED (hearsay), Objection 17 SUSTAINED (lack of personal knowledge), Objection 18-25 SUSTAINED (improper opinion, lack of personal knowledge) Objections 26-27 OVERRULED.

Business and Professions Code §7031 Claim

A person who utilizes the services of an unlicensed contractor may recover all compensation paid. The burden is on the contractor to prove proper licensure. Bus. & Profs. Code §7031 (b), (d). When the contracting party is unlicensed, it is subject to §7031 liability even if the entity’s president or other principal has a license. Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th 71, 74-76.

A plaintiff’s knowledge of a defendant’s unlicensed status does not bar recovery under §7031(b). Alatriste v. Cesar’s Exterior Designs, Inc. (2010) 183 Cal.App.4th 656, 668. When the elements of §7031 are met, an unlicensed contractor must disgorge all profits regardless of the equities. Courts hold the statute represents a legislative determination that deterring unlicensed contractors outweighs any harshness between the parties. Id. at 665-666.

A court may consider parol evidence to determine the meaning of a contract if its language is “reasonably susceptible” to the interpretation urged by the party presenting the extrinsic evidence. Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.

The contracting parties are the Smiths and GNG Development L.L.C., “the contractor.” Plaintiff’s exh. 1. The contract states “the contractor warrants that the Business currently holds a valid license, 1076104, under the laws of the state of California.” Id.

Plaintiff argues it is undisputed that GNG Development, LLC was unlicensed when it performed work, so it must disgorge all revenue per Bus. & Profs. Code §7031.

Defendants present evidence that Faryar Ghaemi, the sister of Farhad Ghaemi, had a general contractor license at all relevant times but concede GNG was unlicensed. Defendants’ Separate Statement Nos. 4-5. Defendants argue summary adjudication is inappropriate because the contract is ambiguous, and extrinsic evidence creates a triable issue of fact as to whether GNG Development (unlicensed) or Faryar Ghaemi (licensed) contracted with the Smiths.

Defendants present evidence that plaintiffs knew Faryar, not GNG, held a license when the contract was formed. Separate Statement Nos. 5, 12. As per Alatriste, plaintiffs’ knowledge of defendant’s licensure status is irrelevant in a disgorgement action under §7031.

The contract is not ambiguous. “GNG Development, LLC” is the contractor. See plaintiffs’ exh. 1. The contract is not “reasonably susceptible” to defendants’ claim that Faryar was a contracting party. The contract was between the Smiths and GNG. Defendants admit GNG lacked a contractor’s license when the contract was formed. Payments are subject to disgorgement under §7031.

Plaintiffs have not proved, however, that they are entitled to summary adjudication against either individual defendant in connection with this cause of action. Neither was named in the contract, so plaintiffs have not proven they were acting as contractors under §7031. GRANTED as to defendant GNG Development, LLC only.

Breach of Contract (Issues of Duty)

A motion for summary adjudication can be used to determine the existence or non-existence of a contractual duty. Linden Partners v. Wilshire Linden Assoc. (1998) 62 Cal.App.4th 508, 519.

Plaintiffs ask the court to rule that defendants GNG Development, LLC and Farhad Ghaemi had a contractual duty to obtain legally required building permits, GNG had a contractual duty to possess a contractor’s license, and GNG had a contractual duty to only hire licensed subcontractors.

Under Cal. Code of Civ. Proc. §437c, a party may move for summary adjudication as to “one or more issues of duty.” Per the statute and Linden, summary adjudication is appropriate even if it only disposes of the duty element of a cause of action, rather than the entire cause of action.

The contract language imposes the first two duties identified—the duties of licensure and obtaining permits -- on GNG. See plaintiff’s exh. 1 §§ A, N. Defendants do not dispute the contract’s validity; GNG was a party to the contract.

The contract does not impose a duty on GNG to only hire licensed subcontractors. While the contract states “all work performed will be done so in compliance with all applicable local, state, or federal statutes and regulations,” this is broad and cannot be said to impose an unambiguous contractual duty on GNG to only hire licensed subcontractors. Further, since Farhad is not a party to the contract, plaintiffs are not entitled to summary adjudication of his alleged contractual duties. Plaintiffs’ citation to Cal. Corp. Code §1701 is unavailing because Farhad did not “enter into” the contract, but only signed on GNG’s behalf.

GRANTED as to GNG’s contractual duty to possess a license and obtain permits, DENIED as to GNG’s duty to hire only licensed subcontractors and as to all contractual duties alleged against Farhad Ghaemi.